Question 1

As a result of a recession, the default risk increases. How does this change affect the loanable funds market?

Accepted Answer

A) There is a movement up along the supply of loanable funds curve. 
B) There is a leftward shift of the supply of loanable funds curve. 
C) There is a movement down along the demand for loanable funds curve. 
D) There is a rightward shift of the supply of loanable funds curve. 
E) There is a rightward shift of the demand for loanable funds curve. 
A) There is a movement up along the supply of loanable funds curve. 
B) There is a leftward shift of the supply of loanable funds curve. 
C) There is a movement down along the demand for loanable funds curve. 
D) There is a rightward shift of the supply of loanable funds curve. 
E) There is a rightward shift of the demand for loanable funds curve.

Question 2

Households will choose to save more if

Accepted Answer

A) expected future income decreases. 
B) current disposable income increases. 
C) current disposable income decreases. 
D) Both A and B are correct. 
E) Both A and C are correct. 
A) expected future income decreases. 
B) current disposable income increases. 
C) current disposable income decreases. 
D) Both A and B are correct. 
E) Both A and C are correct.

Question 3

Table 23.2.2
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule.
   
73)Consider Table 23.2.2. What is the equilibrium real interest rate?
-Consider Table 23.2.2. If planned investment increases by $1.0 trillion at each real interest rate, what is the new equilibrium real interest rate?

Accepted Answer

A) 7 percent a year 
B) 5 percent a year 
C) 6.5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate. 
A) 7 percent a year 
B) 5 percent a year 
C) 6.5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate.

Question 4

The increase in the value of capital is

Accepted Answer

A) gross investment. 
B) depreciation. 
C) net investment. 
D) private sector spending. 
E) wealth. 
A) gross investment. 
B) depreciation. 
C) net investment. 
D) private sector spending. 
E) wealth.

Question 5

Figure 23.2.3
Refer to the figure below to answer the following questions.
  
-Refer to Figure 23.2.3. In Figure 23.2.3, if the real interest rate is 6 percent, the quantity of loanable funds demanded is

Accepted Answer

A) $150 billion. 
B) $300 billion. 
C) $450 billion. 
D) $600 billion. 
E) any amount less than $450 billion. 
A) $150 billion. 
B) $300 billion. 
C) $450 billion. 
D) $600 billion. 
E) any amount less than $450 billion.

Question 6

In the market for loanable funds, if the interest rate is above the equilibrium level

Accepted Answer

A) a shortage of loanable funds exists. 
B) a surplus of loanable funds exists. 
C) expected profit falls. 
D) government expenditure decreases. 
E) wealth increases. 
A) a shortage of loanable funds exists. 
B) a surplus of loanable funds exists. 
C) expected profit falls. 
D) government expenditure decreases. 
E) wealth increases.

Question 7

The total amount spent on new capital is

Accepted Answer

A) wealth. 
B) gross investment. 
C) depreciation. 
D) net investment. 
E) saving. 
A) wealth. 
B) gross investment. 
C) depreciation. 
D) net investment. 
E) saving.

Question 8

When the real interest rate increases,

Accepted Answer

A) the supply of loanable funds curve shifts rightward. 
B) the supply of loanable funds curve shifts leftward. 
C) there is a movement up along the supply of loanable funds curve. 
D) there is a movement down along the supply of loanable funds curve. 
E) the demand for loanable funds curve shifts leftward. 
A) the supply of loanable funds curve shifts rightward. 
B) the supply of loanable funds curve shifts leftward. 
C) there is a movement up along the supply of loanable funds curve. 
D) there is a movement down along the supply of loanable funds curve. 
E) the demand for loanable funds curve shifts leftward.

Question 9

Which of the following will shift the supply of loanable funds curve leftward?

Accepted Answer

A) a decrease in the real interest rate 
B) a decrease in real wealth 
C) a decrease in disposable income 
D) a decrease in expected future income 
E) a decrease in default risk 
A) a decrease in the real interest rate 
B) a decrease in real wealth 
C) a decrease in disposable income 
D) a decrease in expected future income 
E) a decrease in default risk

Question 10

At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's net investment for the year is

Accepted Answer

A) 1 machine. 
B) 2 machines. 
C) 3 machines. 
D) 6 machines. 
E) 5 machines 
A) 1 machine. 
B) 2 machines. 
C) 3 machines. 
D) 6 machines. 
E) 5 machines

Question 11

As the ________ interest rate increases, the quantity of loanable funds demanded ________.

Accepted Answer

A) real; increases 
B) real; decreases 
C) nominal; increases 
D) nominal; decreases 
E) none of the above. There is no relationship between interest rates and loanable funds. 
A) real; increases 
B) real; decreases 
C) nominal; increases 
D) nominal; decreases 
E) none of the above. There is no relationship between interest rates and loanable funds.

Question 12

Figure 23.2.2
  
-Refer to Figure 23.2.2. In Figure 23.2.2, an increase in expected profit will result in a movement from point E to

Accepted Answer

A) point F. 
B) point G. 
C) point H. 
D) point I. 
E) either point I or point F. 
A) point F. 
B) point G. 
C) point H. 
D) point I. 
E) either point I or point F.

Question 13

Table 23.3.6
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced.
  
-Consider Table 23.3.6. If the Ricardo-Barro effect occurs, and if the government's budget becomes a deficit of $2.0 trillion, what is the quantity of investment?

Accepted Answer

A) $6.5 trillion 
B) $6.0 trillion 
C) $5.5 trillion 
D) $5.0 trillion 
E) $10 trillion 
A) $6.5 trillion 
B) $6.0 trillion 
C) $5.5 trillion 
D) $5.0 trillion 
E) $10 trillion

Question 14

Choose the statement that is incorrect.

Accepted Answer

A) Stocks, bonds, short-term securities, and loans are financial assets. 
B) The interest rate on a financial asset is the interest received expressed as a percentage of the price of the asset. 
C) If the asset price rises, other things remaining the same, the interest rate falls. 
D) Insolvency can arise from a previously unexpected large rise in the interest rate. 
E) The price of an asset is determined first, then the interest rate is determined. 
A) Stocks, bonds, short-term securities, and loans are financial assets. 
B) The interest rate on a financial asset is the interest received expressed as a percentage of the price of the asset. 
C) If the asset price rises, other things remaining the same, the interest rate falls. 
D) Insolvency can arise from a previously unexpected large rise in the interest rate. 
E) The price of an asset is determined first, then the interest rate is determined.

Question 15

A government budget deficit ________ the demand for loanable funds and ________ investment.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) increases; rises or falls depending on the change in the supply of loanable funds 
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) increases; rises or falls depending on the change in the supply of loanable funds

Question 16

Changes in all of the following shift the supply curve of loanable funds EXCEPT

Accepted Answer

A) the real interest rate. 
B) wealth. 
C) disposable income. 
D) expected future income. 
E) default risk. 
A) the real interest rate. 
B) wealth. 
C) disposable income. 
D) expected future income. 
E) default risk.

Question 17

Which of the following is FALSE?

Accepted Answer

A) Saving adds to wealth. 
B) Income left after paying taxes can either be consumed or saved. 
C) Saving equals wealth minus consumption expenditure. 
D) Saving is the source of funds used to finance investment. 
E) Saving supplies funds in loan markets, bond markets, and stock markets. 
A) Saving adds to wealth. 
B) Income left after paying taxes can either be consumed or saved. 
C) Saving equals wealth minus consumption expenditure. 
D) Saving is the source of funds used to finance investment. 
E) Saving supplies funds in loan markets, bond markets, and stock markets.

Question 18

Investment will be higher if

Accepted Answer

A) the government deficit is higher. 
B) national saving is higher. 
C) net exports are higher. 
D) the real interest rate is higher. 
E) government spending is higher. 
A) the government deficit is higher. 
B) national saving is higher. 
C) net exports are higher. 
D) the real interest rate is higher. 
E) government spending is higher.

Question 19

An increase in disposable income shifts the supply of loanable funds curve

Accepted Answer

A) leftward and decreases the real interest rate. 
B) leftward and increases the real interest rate. 
C) rightward and decreases the real interest rate. 
D) rightward and increases the real interest rate. 
E) rightward and the demand for loanable funds curve leftward. 
A) leftward and decreases the real interest rate. 
B) leftward and increases the real interest rate. 
C) rightward and decreases the real interest rate. 
D) rightward and increases the real interest rate. 
E) rightward and the demand for loanable funds curve leftward.

Question 20

If households' disposable income decreases, then

Accepted Answer

A) households' saving will decrease. 
B) households' saving will increase. 
C) the supply of loanable funds decreases. 
D) a movement occurs down along the supply of loanable funds curve. 
E) Both A and C are correct. 
A) households' saving will decrease. 
B) households' saving will increase. 
C) the supply of loanable funds decreases. 
D) a movement occurs down along the supply of loanable funds curve. 
E) Both A and C are correct.

As a result of a recession, the default risk increases. How does this change affect the loanable funds market?

Households will choose to save more if

The increase in the value of capital is

Figure 23.2.3 Refer to the figure below to answer the following questions. -Refer to Figure 23.2.3. In Figure 23.2.3, if the real interest rate is 6 percent, the quantity of loanable funds demanded is

In the market for loanable funds, if the interest rate is above the equilibrium level

The total amount spent on new capital is

When the real interest rate increases,

Which of the following will shift the supply of loanable funds curve leftward?

At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's net investment for the year is

As the interest rate increases, the quantity of loanable funds demanded .

Figure 23.2.2 -Refer to Figure 23.2.2. In Figure 23.2.2, an increase in expected profit will result in a movement from point E to

Choose the statement that is incorrect.

A government budget deficit the demand for loanable funds and investment.

Changes in all of the following shift the supply curve of loanable funds EXCEPT

Which of the following is FALSE?

Investment will be higher if

An increase in disposable income shifts the supply of loanable funds curve

If households' disposable income decreases, then

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 23: Finance, Saving, and Investment

As a result of a recession, the default risk increases. How does this change affect the loanable funds market?

Households will choose to save more if

The increase in the value of capital is

Figure 23.2.3 Refer to the figure below to answer the following questions. -Refer to Figure 23.2.3. In Figure 23.2.3, if the real interest rate is 6 percent, the quantity of loanable funds demanded is

In the market for loanable funds, if the interest rate is above the equilibrium level

The total amount spent on new capital is

When the real interest rate increases,

Which of the following will shift the supply of loanable funds curve leftward?

At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's net investment for the year is

As the ________ interest rate increases, the quantity of loanable funds demanded ________.

Figure 23.2.2 -Refer to Figure 23.2.2. In Figure 23.2.2, an increase in expected profit will result in a movement from point E to

Choose the statement that is incorrect.

A government budget deficit ________ the demand for loanable funds and ________ investment.

Changes in all of the following shift the supply curve of loanable funds EXCEPT

Which of the following is FALSE?

Investment will be higher if

An increase in disposable income shifts the supply of loanable funds curve

If households' disposable income decreases, then

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

As the interest rate increases, the quantity of loanable funds demanded .

A government budget deficit the demand for loanable funds and investment.